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CP13/9 Update on guidance for product information

29th Oct 2013


In PS13/2 the FCA published rule changes for Illustrations that extend to the whole range of products where KFIs apply.  Based on queries received since that publication, the FCA has set about to make a couple of key clarifications or amendments i.e.


  • The rule changes for inflation adjusted illustrations applies equally for in-force business
  • Where a client specifically requests, then a standard projection can be produced in nominal terms
  • The FCA intend to reinstate the exemption allowing the intermediate growth rate to be omitted for life business



Background - reminder

The regulator has long believed that current KFIs are poorly designed, too technical and too long.  They have been disappointed that the industry has not taken advantage of the various simplifications they have allowed over the past few years.  They are now looking for significant simplification and have researched drafts which are typically half the length of many currently produced by providers. 


The FCA has now embedded into COBS specific guidance which says that a firm should:-


  • Take into account its target market's understanding of financial services
  • Where possible, use plain language and avoid the use of jargon or technical language
  • Avoid duplication between KFIs and Key Features documents (KFDs)
  • Concentrate on key product information in KFIs and for other information cross-reference where necessary to KFDs
  • Avoid unnecessary disclaimers
  • Take into account a more modern approach to presentation, typography and layout
  • Ideally keep KFIs short - no longer than four pages


CTC has designed a standard illustration that is in line with new FCA guidance.


Drawdown Illustrations

Most commentators agree that, of all the KFIs, those for Income Drawdown are the most complex - largely because more and more requirements have been added over the years.


CTC has now produced a significantly simplified version - in line with the FCA's new guidance - which also incorporates inflation adjusted projections.  This is particularly important for Phased Drawdown cases (for which the non-crystallised funds must be inflation adjusted).


Implementing the Changes

The obvious time to make such changes is with the other April 2014 changes - introducing inflation adjusted illustrations for pensions and changing the maximum projection rates.



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